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Chapter V. Prices of Commodities

The value of a commodity—its relation to other commodities—is not the same thing as its price, the money or gold expression for which it sells on the market. For, while the value of a commodity is determined solely by the amount of socially necessary labor time embodied in it, and fluctuates only as the volume of this time changes, the price of a commodity is influenced by market conditions prevailing at the time of sale.

The relation between the supply of any commodity in the market and the demand for it is an important factor in regulating its price. If the supply is in excess of the demand the price tends to run below its value. If, on the other hand, the demand outruns the supply, its price will incline to be high and the article will sell above its value.

Wages and Prices

Generally speaking, value and price are equal, and, on the average, a commodity which costs ten hours of labor to produce will exchange with gold containing ten hours of socially necessary labor time.

There is an altogether too common belief that the wages paid the workers regulate the prices of commodities. For some time past every source of capitalist propaganda has been used to advance this erroneous idea, and, unfortunately for themselves, the workers have been misled into accepting this pernicious doctrine as economic truth, with the result that, where they have not voluntarily accepted wage cuts, they have been half-hearted in their resistance to the wage cutting campaign instituted by the capitalists.

During the war period, which includes also a few years following the cessation of active hostilities, the (money) wage of the workers had risen to comparatively high levels but the prices of commodities had risen to proportionately higher levels. It is claimed that the higher wages paid the workers during and after the war are responsible for the rise in prices. But during that entire period, more especially after America's entry into the war, there was to an extreme degree a diversion of manufacturing from the production of the ordinary products of peace to an intensified production of war materials. Even much of the production which serves the purposes of war equally with the purposes of peace was preempted for support of the military effort. Many manufacturing plants were transformed from instruments of peace production into war-material establishments of one kind or another. Commercial production suffered a decline.

And as a consequence of the withdrawal of many millions of men from industrial pursuits the demand for laborers greatly exceeded the supply and wages went up. But if the supply of laborers was unequal to the demand for wage workers, so also was the supply of necessaries unequal to the demand for them. Especially is this true when the increased purchasing power of the workers is taken into account.

Imports were nominal and as the countries to which we usually export were involved in the war and intent up—on furthering their own military efforts they had little to export, nor opportunity to do so had they been so inclined, as water transportation was extremely perilous. Competition between the American manufacturers and merchants was practically eliminated. There obtained then a market condition where supply was greatly under demand and prices ruled high. There was also a labor market where demand was greatly in excess of supply and wages (money wages) had risen.

The high prices of commodities were not due to the high (money) wages paid the workers, but were due to the market conditions prevailing which were favorable to the dealers.

Cause of Commodity Price Rises

The desire of the workers, whose wages had risen, to improve their living standards led to great buying activity in the necessaries of life, and, as well, of things hitherto out of reach, and was responsible for much of the commodity price rise. There was also a rise in the price of luxuries because the war-profiteering, and that which was not profit but plain (even if protected) graft enabled the profiteers and grafters to indulge their craving for luxurious adornment and other extravagances. The war period was the golden opportunity of the bourgeoisie and they minted every minute.

Had wages not risen everyone realizes what effect the restricted production and the consequent market condition would have had upon the workers and their living standard. Wages had to rise and did rise only after commodity prices compelled a raise. Whenever during the war period a rise in wages was demanded it was always based upon a preceding increase in commodity prices, rents, etc., which in itself shows that high wages did not cause high prices, but, on the contrary, followed as a result of high prices.

Had the period lasted longer there would have been a return to normal prices and as a result the workers would have established a new and improved standard of living. But the capitalists determined not only to prevent any elevation of the old, traditional living standard but to force a lowering of it.

"The American Plan"

For every improvement of the workers' living standard strengthens the position of the working class and weakens that of the employing class. The advantage of cheap labor is well understood by the capitalist class, for the lower the living standard the cheaper the laborer. So there was a concerted move by the capitalist interests which had for its objective the lowering of the workers' living standard. This movement is known variously as "Americanism," "The American Plan," and the "Open Shop Movement." It is well organized, well financed and well managed. This movement has made some headway due in great measure to the acceptance by the workers of the economic sophistry that the high prices were due to high wages. Just in proportion as they accepted this for truth they refused to resist the effort to reduce their living standard by accepting wage-cuts. But the principal reason was the fact that owing to their numerous craft unions they were unable to restrict competition among themselves and to present a united front to the capitalists.

"By what means is the price of a commodity determined?" asks Marx in "Wage Labor and Capital," and then proceeds to answer his own question as follows: "By means of competition between buyers and sellers and the relation between supply and demand—offer and desire. And this competition by which the price of an article is fixed is threefold.

"The same commodity is offered in the market by various sellers. Whoever offers the greatest advantage to purchasers is certain to drive the other sellers off the field, and secure for himself the greatest sale. The sellers, therefore, fight for the sale and the market among themselves. Everyone of them wants to sell, and does his best to sell much, and if possible to become the only seller. Therefore each outbids the other in cheapness, and a competition takes place among the sellers which lowers the price of the goods they offer.

"Finally competition is going on between buyers and sellers; the one set want to buy as cheaply as possible, the other to sell as dear as possible. The result of this competition between buyers and sellers will depend upon the two previous aspects of the competition; that is, upon whether the competition in the ranks of the buyers or that in those of the sellers is the keener. Business thus leads two opposing armies into the field, and each of them presents the aspect of a battle in its own ranks among its own soldiers. That army whose troops are least mauled by one another carries off victory over the opposing host."—(Wage Labor and Capital, pp. 19-20.)


  • 1. Is there a difference between the value of an article and its price?
  • 2. What regulates the price of a commodity?
  • 3. Does a raise in wages compel a rise in prices? Why?
  • 4. What was the primary cause of high prices during and immediately following the war?
  • 5. What does the "open shop drive" aim at?
  • 6. Do the craft unions help those behind the open shop drive? How?
  • 7. Show the result of competition among sellers of a commodity. Apply it to labor power.
  • 8. What do you understand by "the competition between buyers and sellers"?
  • 9. What do you understand by "offer and desire" as used in the text?
  • 10. Can you apply Marx' illustration of "opposing armies" to the workers? How?

Next page: Chapter VI. Price Regulation